Sirius XM raises prices; sees 2014 results below forecasts

Reuters

By Liana B. Baker

Oct 24 (Reuters) - Sirius XM Radio Inc said onThursday it would raise prices by $6 per year for its basicpackages starting in January and forecast weaker-than-expectedearnings and revenue for 2014.

Customers will have to pay 50 cents more per month for thesatellite radio service that is popular in cars and featureshundreds of channels that play few commercials and air exclusivecontent such as Howard Stern's show.

This is only the second time Sirius XM has raised pricessince a government ban was a lifted following the merger ofSirius and XM radio in 2008. Its last price raise was in 2011when it raised the cost of its basic package by $1.50. It didnot see significant customer cancellations after that move.

Sirius XM CEO Jim Meyer said on Thursday that the priceincrease would not lead to customers cancelling theirsubscriptions.

"While changing prices is a difficult decision, particularlyin the competitive audio entertainment market, we are confidentthat our subscribers see significant value in our service andthat this modest change will not significantly impact retentionnext year," Meyer said on a conference call with analysts.

Gabelli & Co analyst Brett Harriss said he was surprised bythe price increase but said it was a positive sign that showsSirius XM is confident in its product and open to further hikes.

The company added 513,000 net subscribers to its service inthe third quarter and set its 2014 revenue forecast at $4billion, below Wall Street estimates. Analysts, on average,estimated that revenue will come in at $4.17 billion next year.

Sirius XM also said it expected adjusted earnings of $1.38billion next year, which came in below estimates by Gabelli & Co$1.45 billion and ISI's estimates of $1.51 billion.

Sirius also missed revenue and net income estimates in thethird quarter, sending shares down 2 percent to $3.99 per share.Its shares are up more than 40 percent over the last 12 monthsand were little changed on Thursday.

Sirius is known for giving financial forecasts that arebelow analysts' predicitions. It usually raises those forecastsover the course of the year.

The company said it plans to add a net 1.6 millionsubscribers this year. It ended the quarter with 25.6 millionsubscribers.

The New York-based company, controlled by John Malone'sLiberty Media Corp, faces increased competition fromInternet streaming services such as Pandora Media Inc thatare trying to crack the car market, where Sirius XM has a strongfoothold.

Third-quarter net income was $62.89 million, or 1 cent pershare, compared with $74.5 million, or 1 cent per share, a yearago. The company missed analysts' estimates by a penny.

Sirius XM said it generated $245 million in free cash flow,up from $195 million a year ago.

Revenue per subscriber was $12.29, up from $12.14 a yearago, but below what analysts at Macquarie expected.

Quarterly revenue increased 11 percent to $961.5 millionfrom a year ago, and missed estimates by less than $10 million.

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